The Beer Institute awarded Anheuser-Busch’s former CEO August Busch III an industry service award a few days ago. During Busch III’s acceptance speech, he took aim at another commodity – marijuana. He noted that legalizing marijuana “will reduce the consumption of alcohol” and that it would “take some of [the beer industry’s market]share.” He also noted that he did not think legalizing marijuana “does anybody any good in our industry – or for that matter the United States . . . .” Perhaps not surprisingly, he deemed the interests of the industry in which his family is heavily invested to be in lockstep with the interests of the entire country. As they say, where you stand often does depend on where you sit. Finally, Busch III called on the current A-B North American CEO to “work hard against marijuana.”
It is not a secret that the alcohol industry has been lobbying hard against the marijuana legalization movement. In Massachusetts, for example, two alcohol beverage related trade associations – the Beer Distributors of Massachusetts and the Wine & Spirits Wholesalers of Massachusetts – contributed $75,000 to an anti-legalization campaign in 2016.
The obvious rationale for the alcohol industry lobbying against legalization is that marijuana and beer are both adult recreational substances and, if there is a finite market of adult consumers looking for that type of adult recreation, the increase of market share for one substance will inevitably lead to the decline of another. The reports, however, are a mixed bag at best.
A Distilled Spirits Council study found that in three states where recreational marijuana was permitted – Colorado, Oregon, and Washington – spirit sales went up since marijuana was legalized. While wine and beer did not fare as well, that is potentially part of an overall market trend. In fact, the Council’s chief economist noted that trends for alcoholic beverages have “been fairly consistent regardless of whether or not you have legalized recreational marijuana in a state . . . .” This comports with the impact of marijuana legalization’s impact on alcohol consumption in Canada – at least so far. Prince Edward Island, for example, saw the highest spending on marijuana on a per capita basis, but alcohol sales increased in the province since legalization occurred.
A study based on a review of survey data, however, came to a different conclusion. Among current marijuana users, beer was the most popular alcoholic beverage and 60% of marijuana consumers cited a reduction in alcohol consumption when mixing the two products.
Needless to say, the jury is still out on the issue. Just look at the first few results on Google:
If, however, we assume for the sake of argument that alcohol sales decline as a result of marijuana legalization, it is something that big breweries should be adapting for anyway. The legalization movement is marching on whether Anheuser-Busch likes it or not. It can fight alongside private prison lobbies and giant pharmaceutical lobbies, or it can take the approach of being on the right side of history and adapting to the market.
As big breweries know, the market for consumable adult recreational products constantly evolves. They, for example, have taken a hit with the growth of craft breweries. In 2018, craft beer sales rose 7% as total beer sales declined by 1%. Large breweries have “adapted” to this trend by buying up successful craft breweries.
Now, the writing is on the wall – the market for consumable adult recreational products is evolving. Those in the industry can rail against it or adjust to the new market. Craft brewers have already started to take action by, for example, producing hemp beers. Additionally, breweries can make non-alcoholic cannabis beverages (federal legal status is still a bit gray – the FDA has not approved even CBD for human consumption), leveraging their beverage production knowledge and equipment, and their distribution networks. Lagunitas (owned by large brewery Heineken), for example, has begun production of cannabis-infused sparkling waters.
Rather than complain about an evolving market, it is time to adapt. Legalization has the potential to provide economic opportunities for small and large businesses alike, and perhaps more importantly, it has the potential to alleviate the inequities that have resulted from cannabis prohibition. Anheuser-Busch’s bottom line is not what should be driving the discussion – and if it is so concerned with the potential impact of legalization on the beer market, then it is time to stop denying the inevitable and start thinking ahead.